60s & Beyond Risk: Withdrawal Rate

Retirement is a time of change in many ways. Your new daily routine may take some time to adjust to, but managing your money and potentially new sources of income is also a big change. A major concern of many retirees is how much income can be withdrawn from their retirement accounts without eroding principal. Developing a plan for your rate of withdrawal is important in both the short and long term. When determining the amount to withdraw, you want to keep several things in mind. First, inflation, over time, will eat into your savings and income and affect your purchasing power in years to come. Today’s retirees may spend 25-30 years in retirement. This all means that you will need to grow your savings and income to keep up with inflation. The withdrawal rate you can sustain may be lower than you think.